Kerala university MBA Performance management

1. Measurement of performance at
Organisational Level
 Three most important things you need to measure in a business are customer
satisfaction, employee satisfaction and cash flow.
 The different approaches to measuring organizational performance are generally
recognized as:
 Balanced scorecard;
 the European Foundation for Quality Management (EFQM)
model;
 economic value added (EVA) and other economic measures
of value;
 traditional financial ratios. 1

2. The balanced scorecard
 Originally developed by Kaplan and Norton (1992)
 They take the view that what you measure is what you get , and they emphasize
that no single measure can provide a clear performance target or focus attention
on the critical areas of the business.
 Managers want a balanced presentation of both financial and operational
measures .
 It is a set of measures that gives top managers a fast but comprehensive view of
their business.
 The scorecard requires managers to answer four basic questions, which means
looking at the business from four related perspectives:
1. How do customers see us? (customer perspective);
2. What must we excel at? (internal perspective);
3. Can we continue to improve and create value? (innovation and learning
perspective)
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14. The European Foundation for Quality Management
(EFQM)
 The EFQM model indicates that customer satisfaction, people
(employee) satisfaction and impact in society are achieved
through leadership.
 This drives the policy and strategy ,people management,
resources and processes, leading to excellence in business
results.
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15. The nine elements in the model are defined as follows:
 1 Leadership how the behaviour and actions of the executive team and all other leaders
inspire, support and promote a culture of total quality management.
 2 Policy and strategy how the organization formulates, deploys and reviews its policy and
strategy and turns it into plans and actions.
 3 People management how the organization realizes the full potential of its people.
 4 Resources how the organization manages resources effectively and efficiently.
 5 Processes how the organization identifies, manages, reviews and improves its processes.
 6 Customer satisfaction what the organization is achieving in relation to the satisfaction of
its external customers.
 7 People satisfaction what the organization is achieving in relation to the satisfaction of its
people.
 8 Impact on society What the organization is achieving in satisfying the needs and the
expectations of the local, national and international community at large.
 9 Business results what the organization is achieving in relation to its planned business
objectives and in satisfying the needs and expectations of everyone with a financial interest
or stake in the organization.
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16. EFQM model can help performance management by:
 developing a fuller understanding of how business results are
achieved and processes continually improved;
 offering mechanisms for tackling systems problems in the
workplace;
 promoting performance management as a two-way dialogue;
 providing a positive and universal framework for the description
of jobs and roles;
 helping to align individual and business objectives;
 pointing the way to identifying, defining and building the
capabilities that the organization needs its people to demonstrate.
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17. Economic value added (EVA)
 Economic Value Added (EVA) is an accounting measure of the value a company creates.
 EVA = (Return on Capital - Cost of Capital) x (Capital Invested)
 The economic value added (EVA) measure represents the difference between a companys post-tax
operating profit and the cost of the capital invested in the business.
 The theory of EVA is that it is not good enough for a company simply to make a profit. It has to justify the
cost of its capital, equity included.
 If it is not covering that, it will not make good returns for investors.
Traditional financial ratios
 The traditional financial measures include: return on equity, return on capital employed, earnings per
share, price/earnings ratio, return on sales, asset turnover, overall overheads/sales ratio, profit or
sales or added value per employer, and output per employee (productivity).
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18. Performance Dash Board
A dashboard is a visual display of the most important information needed to achieve one or more objectives;
consolidated and arranged on a single screen so the information can be monitored at a glance.
 Performance dashboards are common management tools used to gauge
performance and enable business people to measure, monitor, and manage the
key activities and processes needed to achieve business goals.
 They can be designed and developed to direct a wide range of objectives, from
monitoring the usability of a global organization’s business strategy to keeping
a check on a department’s ability to achieve targets.
 three main sets of functionality:
• Monitor critical business processes and activities using business performance
metrics that alert users to potential problems.
• Analyze the root cause of problems by digging into relevant and timely
information.
• Manage people and processes in order to improve decisions and optimize
business performance.
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19.  Key Characteristics of Great Dashboards
• They communicate information quickly.
• They display information clearly and efficiently.
• They show trends and changes in data over time.
• They are easily customizable.
• The most important widgets and data components are effectively presented in a limited
space.
 There are 4 general subtypes of dashboards:
1. Strategic - focused on long-term strategies and high-level metrics
2. Operational - shows shorter time frames and operational processes.
3. Analytical - contains vast amounts of data created by analysts.
4. Tactical - used by mid-management to track performance.
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